SentinelOne (NYSE:S) Q3 Sales Beat Estimates, Stock Soars

Petr Huřťák /
2023/12/05 4:22 pm EST

Cyber security company SentinelOne (NYSE:S) reported results ahead of analysts' expectations in Q3 FY2024, with revenue up 42.4% year on year to $164.2 million. Guidance for next quarter's revenue was also better than expected at $169 million at the midpoint, 1.4% above analysts' estimates. It made a GAAP loss of $0.24 per share, improving from its loss of $0.35 per share in the same quarter last year.

Is now the time to buy SentinelOne? Find out by accessing our full research report, it's free.

SentinelOne (S) Q3 FY2024 Highlights:

  • Revenue: $164.2 million vs analyst estimates of $156.3 million (5% beat)
  • EPS (non-GAAP): -$0.03 vs analyst estimates of -$0.08
  • Revenue Guidance for Q4 2024 is $169 million at the midpoint, above analyst estimates of $166.6 million
  • Free Cash Flow was -$26.38 million compared to -$15.19 million in the previous quarter
  • Net Revenue Retention Rate: 115%, in line with the previous quarter
  • Customers: 11,500, up from 11,000 in the previous quarter
  • Gross Margin (GAAP): 73.3%, up from 64.4% in the same quarter last year

“Our third quarter performance exceeded our top and bottom line expectations, delivering industry-leading growth and margin improvement,” said Tomer Weingarten, CEO of SentinelOne.

With roots in the Israeli cyber intelligence community, SentinelOne (NYSE:S) provides software to help organizations efficiently detect, prevent, and investigate cyber attacks.

Endpoint Security

Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks. As the volume of internet enabled devices grows, every device that employees use to connect to business networks represents a potential risk. Endpoint security software enables businesses to protect devices (endpoints) that employees use for work purposes either on a network or in the cloud from cyber threats.

Sales Growth

As you can see below, SentinelOne's revenue growth has been incredible over the last two years, growing from $56.02 million in Q3 FY2022 to $164.2 million this quarter.

SentinelOne Total Revenue

Unsurprisingly, this was another great quarter for SentinelOne with revenue up 42.4% year on year. Quarter on quarter, its revenue increased by $14.74 million in Q3, which was roughly in line with the Q2 2024 increase. This steady growth shows that the company can maintain a strong growth trajectory.

Next quarter, SentinelOne is guiding for a 25.4% year-on-year revenue decline to $169 million, a further deceleration from the 92.1% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 30.6% over the next 12 months before the earnings results announcement.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Customer Growth

SentinelOne reported 11,500 customers at the end of the quarter, an increase of 500 from the previous quarter. That's a little better customer growth than last quarter but a bit below what we've typically seen over the last year, suggesting that the company may be reinvigorating growth.

SentinelOne Customers

Key Takeaways from SentinelOne's Q3 Results

Although SentinelOne, which has a market capitalization of $5.98 billion, has been burning cash over the last 12 months, its more than $798 million in cash on hand gives it the flexibility to continue prioritizing growth over profitability.

We were impressed by SentinelOne's strong gross margin improvement this quarter, showing the company is unlocking the operating leverage in its business model. We were also excited its revenue and EPS outperformed Wall Street's estimates. Overall, we think this was a strong quarter that should satisfy shareholders. The stock is up 9.8% after reporting and currently trades at $21.99 per share.

So should you invest in SentinelOne right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

Join Paid Stock Investor Research

Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.